Netflix tears up Red Envelope

Company's distribution, production co. to close

Netflix is exiting the theatrical distrib and production biz, shuttering its Red Envelope arm after a nearly three-year experiment.

Red Envelope released more than 100 films in its run, often partnering with other distribs as a marketing weapon due to Netflix’s rich database of consumer preferences developed by its movie rental business. It was involved in the distribution of titles such as “4 Months, 3 Weeks, 2 Days” and “2 Days in Paris,” and helped produce pics like Kirby Dick’s doc “This Film Is Not Yet Rated.”

One hurdle to continuing Red Envelope, execs said, was the notion of the company competing against the same studio suppliers it was negotiating with every day over DVDs and streamed content. The complications involved in acquiring, producing and distributing pics were an unnecessary headache for a company already battling a resurgent Blockbuster and the dizzying pace of technological change and consumer habit.

Four employees were tasked specifically to Red Envelope. Company reps said they were being considered for positions elsewhere within Netflix.

Company shares, while well off their 52-week peak of $40.90, have responded well to the news, climbing more than 2% Wednesday to $27.79 in midday trading, though volume was light.